Bloomberg News

Japan's Bond Decline Amid Global Recovery Signs

April 01, 2012

Japanese government bonds declined, sending 10-year yields to an almost one-week high, amid signs of economic recovery overseas and speculation the Bank of Japan will increase stimulus efforts to support domestic companies.

Longer maturity debt led declines as Japanese stocks rallied. U.S. Treasuries fell for a second day after data showed Chinese factories expanded and ahead of reports that may signal improvement in U.S. manufacturing and employment.

“As we continue to see signs of recovery in the global economy, many investors are expecting to see yields go a little bit higher,” said Makoto Noji, a Tokyo-based senior debt and currency strategist at SMBC Nikko Securities Inc. “JGB yields will rise if Treasury yields rise.”

Japan’s 10-year yields rose 2 1/2 basis points, or 0.025 percentage point, to 1.01 percent at 12:33 p.m. in Tokyo, the highest since March 27. Yields on 20-year and 30-year bonds both increased three basis points. The Nikkei 225 Stock Average of shares rose 0.6 percent.

In the U.S., the Institute for Supply Management’s gauge of manufacturing probably rose to 53 in March from 52.4 the prior month, according to median estimate of economists surveyed by Bloomberg before the report today. That would follow a Chinese factory gauge released yesterday that signaled expansion.

The quarterly Tankan index of sentiment among large manufacturers was unchanged in March from minus 4 in December, the Bank of Japan (8301) said today in Tokyo. That was less than the median estimate of 25 economists surveyed by Bloomberg News for a reading of minus 1. A negative number means pessimists outnumber optimists.

“There are expectations that the Bank of Japan may ease policy at some point after a bad Tankan report,” said Noji, who expects Japan’s 10-year yields to rise to 1.1 percent by the end of April. “The impact of Tankan on JGB market may be limited, however as additional easing has already been largely priced in by the market.”

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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